WASHINGTON — While several space companies have or are planning to go public, some in the industry see these initial public offering (IPO) plans as more of an anomaly than a trend.
Firefly Aerospace released more details July 28 about its IPO the company announced July 11. The company said it plans to sell 16.2 million shares at a price of between $35 and $39 per share. That would raise up to $631.8 million for Firefly if the company prices the shares at the high end of that range. Underwriters will also have the option to purchase an additional 2.43 million shares.
The shares sold would account for only a little more of 10% of the outstanding common stock. If the shares are sold at the high end of the range, it would value the company at about $5.5 billion. Firefly did not disclose in the updated filing with the Securities and Exchange Commission when it would go public.
Firefly is in line to be the third company in the space industry to go public this year, after Karman Space and Defense in February and Voyager Technologies in June. Karman raised about $185 million in its IPO and Voyager $440 million after its underwriters’ allotment, according to data from Chris Quilty of Quilty Space.
That series of IPOs, though, is not necessarily a trend that other space companies will follow. “I think it’s an outlier. I think you stay private as long as you can,” said Adam Broecker, vice president at Lockheed Martin and head of its LM Evolve unit, during a panel discussion at the recent AIAA ASCEND conference in Las Vegas.
What often drives companies to go public, he said, is the need to raise money that they can’t on private markets. “That doesn’t feel like what’s going on now,” he said, because of the increase in private investment in space companies, particularly in larger, later rounds.
Noah Feingold, an associate at Stellar Ventures, said there has been “capital compression” in private investment in recent years, with funds that would have invested in IPOs instead going into later-stage private rounds. That, in turn, pushes funds that would have invested in those later rounds into earlier rounds.
“That follows all the way down to the seed and pre-seed stage,” where his fund invests, he said. “You’re seeing enormous amounts of capital putting in at the seed and pre-seed stage. You’re seeing $20-50 million initial rounds where before you were seeing $2-10 million.”
Another factor is the existence of secondary markets for stock that can provide liquidity, particularly for employees with stock options. “It used to be you had to go public within 10 years of starting your company if you gave stock options because those stock options expire,” said Rafferty Jack, principal at Jack Industries.
Secondary markets enable companies like SpaceX to stay private but allow employees to sell shares. “So if you can stay private and give your employees liquidity through the secondaries, then it really does become unappetizing to go public,” she said.
Staying private, Jack added, avoids the overhead of being a public company. “With a public company, depending on how they do the math, 30% of their employees and costs are just doing public company and regulatory work,” she said. “It’s a whole business to be public.”